stocks

Characteristics of a risky stock

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Out of the asset classes of cash, bonds, property, and equities, the latter is considered by most to be the riskiest investment. However, investors can identify stocks to match their risk profile by evaluating the level of risk by looking at the debt, market cap, profitability, age, and sector of that company. Large company debt Companies which have large debt numbers on their balance sheet are riskier than companies that have lower debt levels. To calculate the debt ratio, you …

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What are interest rate sensitive stocks?

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It is beneficial to know what stocks are affected by different macroeconomic circumstances. This is so portfolios can be managed to take advantage of the change in environment. Last week we discussed defensive and cyclical stocks, this week we discuss interest rate sensitive sectors. Definition Interest rate sensitive stocks are stocks which react to interest rate movements more than the others in the market. A discounted cash flow is used to calculate a present value of the stock or to …

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What is a divestment?

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Companies can use excess cash to acquire new companies but they can sell a subsidiary to obtain cash and add value back to the parent company. In this article we discuss about what you need to know about divestment. What is a divestment? A divestment occurs when a company sells off a subsidiary or some of its assets. It is essentially the opposite of an acquisition. The company is looking to optimise the value of the parent company which may …

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How do you know a stock is expensive? Part 1

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Often in the financial media, a talking head or analyst will dismiss a stock as being “too expensive”. Yet often these expensive stocks are the ones that produce the best returns over time. So what does it actually mean when someone states that a stock is too expensive? The P/E ratio One of the methods investors use to evaluate a stock price is to calculate its price to earnings (P/E) ratio. This ratio compares the stock price against its per-share …

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5 macro factors that affect the stock market

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Fundamental analysis of companies can give us insights into their financial health. Technical analysis can provide an insight into how a stock is trending. However, investors cannot ignore macro factors within the current economic environment.  Some of these factors include economic growth, unemployment, inflation, interest rates, and exchange rates. All of these can affect the stock market. If investors are aware of these factors, they can adjust their portfolio to lessen portfolio losses or maximize profits. 1.Economic growth The economy’s …

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